employee excited to share jobs

Generate Phenomenal Results With Your Employee Referral Program

I talk about this all the time. Though people nod their heads, they don't usually step in and do the things it takes to actually IMPROVE their employee referral program.

I think it's because...

  1. They think they have a program and there's not much they could do to fix it.
  2. They think only money will increase the payout to the employees, and they don't have the budget or don't want to ask for that budget.
  3. They're worried it won't work. Maybe they look at it and say "We're too small. We don't have that many employees." Or they say "We're big. We think employee referrals create bias."

Luckily, I have my own experimentation lab.

Building an Employee Referral Flywheel

Establish a thriving employee referral program that will generate quality applicants.

I have a company that now has over 200 employees. So, to prove that a well-functioning employee referral flywheel can actually have a huge impact, I did my own test.

ApplicantPro began 2021 with 140 employees. Now seven months later, we have 210.

We've hired 78 people. If you do the math there, that means that about eight of them were replacements and 70 of them were new, mostly part-timers. We've added over 60% to our headcount, and we're still hiring!

When there was word of the economy opening back up, I knew we needed to scale from a company standpoint. But, I kept hearing from the managers that, "we're not getting enough qualified applicants to hire the type of people that we want, and to fill our jobs."

I came up with four core metrics to measure and track the success of an employee referral program...

Four Core Metrics

  1. Applicants per employee... That's how many people applied in a given month that came from an employee referral divided by your total number of employees for the month.
  2. Employee participation... What percentage of your employee base referred at least one person during that given period of time? I'm measuring this on a quarterly basis, but you can do a monthly metric too.
  3. The hire rate... What percentage of those employee referrals did you hire?
  4. Hire percentage... Of your total hires, what percentage came from employee referrals?

During a given month or given period, you'll want to check your total hires. And remember, that while some of these other numbers may not increase, the goal is to see more people hired from employee referrals.

Now, let me tell you our starting point

I understand our results at the beginning of this data study were better than most employers.

In the 4th quarter of 2020, we were receiving .48 Applicants per employee... Meaning, we get one applicant for every two of our employees... That's the starting point.

So you know how that compares, I recently pulled the data on about 10 different clients of mine in 10 different industries. The average of all of them was 0.18. Our team was already 2.5x the average company.

There are ample reasons why we started above.

What we were doing...

  • We randomly talked about employee referrals. Inherently our employees and managers knew about it because it would come up once in a while, but it wasn't consistent.
  • We sent out drip weekly emails to all employees of all the openings, but we didn't actually talk about it in meetings from top to bottom. Employees shared the open positions because those emails had a link attached.
  • We did give credit, but only for the hire. We were paying out $200 per hire... we actually increased that to $250....entirely on accidentally... and that didn't drive impact.
  • We didn't really have a scoreboard. We weren't tracking. We had the data, but we weren't talking about total employee referrals or any type of metrics.
  • We didn't have a contest or a focus to drive the flywheel.

There are a few other amplifiers on our employee referral flywheel that would spin it around...

  • Experience... Probably half of our entire team came from a referral so they know where they came from.
  • We're a hiring company... you would assume our employees have a higher-level understanding of what makes that work.
  • We had a shareable experience as part of our perks... house cleaning! Our employees are constantly posting about the house cleaners we pay for coming and cleaning their house. This creates a little bit of a buzz out there in their neighborhood or in their social media following when they post about a job and our company.

In order to change... I had to engage my management team!

I told them that we have to solve our applicant flow problem. The solution is not HR and it's not job boards. The solution is that we have to focus on employee referrals. We have to make it work. This included my CFO, my HR manager, my CRO... everybody at the top level. This would be our focus. Whether you want to call that an OKR, or whatever you call it in your industry, this was our focus for the quarter.

Our core focus... we needed to shine a light on our employee referral program and drive engagement. That was our mantra.

If we highlighted it and got enough of our team engaged in it from top to bottom, would it produce the desired outcome?

Here's what we did...

I'm going to walk through each step of the employee referral flywheel and tell you what we did that was different.

Step one... Communicate it

This one is important. This one is vital. From that day forward in every single meeting, from that point on, we made sure to talk about:

  • The importance of employee referrals
  • Why it was vital for our ability to grow and expand
  • How much we needed ALL hands on deck. This requires help from all employees.
  • How important these referrals are to our management team, our company, and our individual department teams.

Step two... Contest and focus

We wanted to switch the focus to be even more intent on sharing. Instead of just paying for the hire, we moved our compensation model to earlier in the process. We started rewarding for behavior instead of the result. A result would be the hire. Behavior would be sharing. Now clearly, we could have rewarded based on shares. But instead, we focused on applicants. A good middle ground between paying for shares and paying for hires was paying for the number of applicants. We came up with a contest where we would give out Amazon gift cards for $50 each to the top 10 people who referred the most applicants during a given month. We actually ran that for three months in a row and we're still running it now. That makes our total cost $500.

We would have spent $500 on this, even if we hired nobody! It doesn't take the place of the $250 per hire payout. We still paid that out. It was there as a buzz and focus to get everybody engaged on that part.

Step three... Drip

Clearly, we still had our weekly email. But along with that, in every management meeting, team meeting, the social media platform we use as a company called Workplace (by Facebook), we would share stuff and talk about it. So there was a constant drip of "hey, please share these jobs!"... "Hey, this is the job we're highlighting this week!" Our employees were constantly reminded of referral opportunities.

Step four... Sharing

We were still using our tool that allows the employees to very easily share the job openings. We also created a Google Drive doc with suggestions for conversation starters to post on social media. We came up with 5-10 conversation starters as ideas of what they could say about the job before they shared it. They were different ideas like stories from actual employees doing the job, etc.

Step Five... Scoreboard

We added rankings onto our scoreboard that all employees could see. It was a running scoreboard that showed who the top 10 referring employees were. It also showed where each employee ranked even if they were outside of the top 10. Employees could go and look at it as often as they wanted. We would screenshot that and show/post it in other places to make sure everybody saw who was at the top.

Step Six... Credit

Every single time we announced a new employee, we also thanked the person who referred them. We made a big deal out of the winners at our company meeting and showed who they were. It wasn't just a gift card. It was the fact that we made a big deal out of it. We thanked them and made sure everybody was aware of the value they were bringing to our company.

Here are the results...

  • Our applicants per employee went from 0.48 to 1.78! That's a 300+% increase over what we were doing before...
  • Employee participation went from 30% up to 40%... meaning in that three-month period, 40% of our employees referred at least one person.
  • We had a 270% increase in applicant flow.
  • Our hire rate stayed relatively the same... It went from 5% to 6.4%... Meaning we hired 6.4% of the applicants that were referred.
  • To put that into perspective....We hired 20 employee referral applicants compared to 3 from the quarter before.

The point is... it's not just about applicants. We hired over 6x more people! That's a massive improvement in the number of people we hired from employee referrals.

I'm here to tell you, you can have the same type of success by driving and engaging an employee referral program... regardless of the size of your company!

Schedule a demo with us if you'd like help replicating this in your organization!

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6 Steps to building a powerful employee referral flywheel!

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